Implementing IFRS 17: Three Actuarial Data Management Success Factors

Posted on15 May 2019 — by Dr. Daniel Trzesniak

It is common knowledge that actuarial model outputs and related data elements are crucial for IFRS 17. However, there is no common approach for how to address this data. The current actuarial processes and workflows have often evolved organically over time and include a great deal of human intervention. How to transform these processes and workflows into an operational IFRS 17 target infrastructure is still a lively debated challenge within the industry.

In this installment we discuss three success factors that can move your IFRS 17 journey forward, independently of your historical process and system landscape.

1. Respect the DRY principle

DRY or “Don’t Repeat Yourself” is a frequently cited software design principle, which states that duplication of logic should be eliminated via abstraction and duplication in process should be eliminated via automation. This principle is also valid when changes are made to the finance process landscape.

Today actuaries work with well-established and historically grown processes and workflows when sourcing data from policy admin or accounting systems. Quite often the idea of a single finance data hub seems very attractive, a perceived silver bullet enabling extraction of all inputs from one single source.

While this idea has a lot of benefits in theory, in practice the data consolidation is a very labor-intensive exercise. Usually the data language used by policy admin systems and actuarial tools is not consistent. The lack of common data language does not allow for automated exchanges between data silos within an organization. Thus, achieving such a consolidated data hub requires an immense amount of manual data adjustments, a slow, error prone and inefficient process.

In addition, a finance data hub only serves as a collection of data elements having their transactional home elsewhere. This duplicates data outputs in violation of the DRY principle with the result that the data soon will be out of sync between source and hub.

Observed standard industry data flow

Legacy architecture

For IFRS 17 it is the best approach to work with the data you have at hand directly from the source, which can be made possible with modern software architectures and integration techniques.

Modern target architecture

Systemorph

Our recommendation is to follow the DRY principle. Avoid data duplication and focus on a solution that work with data directly from the source.

2. Automate for real process improvements

To find out where the main pain points reside in the actuarial processes and workflows relevant for IFRS 17, talk to your actuaries and use real world examples. How much time do they spend gathering and preparing data for their models? How much time do they anticipate spending on moving the outputs into an integration layer or subledger? Once you know the pain points you can address them.

As mentioned above, a modern software architecture and integration techniques can make a huge difference reducing the manual time spent for processing data. Modern systems such as the Systemorph solution are fully capable of automating interpretation of actuarial model output directly from its source, even if your business divisions do not share that same model language.

The system then serves as a foundation for automating data management processes. This enables streamlining of reporting and analysis, creating a consistent and repeatable foundation for IFRS 17 compliance as well as improved overall data management.

Our recommendation is to focus on increasing automation. This will save time processing data, allowing more time for analysis.

3. Prepare for flexibility

Up to now, actuarial steering was often more art than science. There is no one-size-fits-all algorithm that provides accurate movement analysis or the anticipated profit at all times. The parameters driving IFRS 17 results are simply too numerous to capture with a limited set of formulae that can be utilized based on a target profit scenario.

To accommodate this complexity, it is important to ensure that IFRS 17 process and solutions are flexible and can be adjusted rapidly to respond to effects from changing economic or business parameters. This is key for both Life and Non-Life actuaries.

Actuaries require an environment that allows them to test and calibrate the preparation of results in an accessible and rapid manner. Relying on cumbersome manual processing and feeding data through multiple integration layers is therefore not a feasible option if you want to keep or accelerate current closing timelines.

Our recommendation is to build in flexibility. Preset or too rigid systems and processes will simply not work under IFRS 17.

We help our clients to keep these guiding principles in mind – DRY, automation, flexibility – as they develop effective IFRS 17 reporting processes that also serve to revolutionize data management in their environments.

Contact us today to learn more about how Systemorph’s solutions can help you achieve IFRS 17 compliance.